MEXICO CITY, (Reuters) – A Mexican law nationalizing its future lithium sector violates the country’s trade obligations. This could lead to costly consequences for the government if companies are trying to recover losses.

Mexico’s Congress approved last week a bill to nationalize lithium that was championed and supported by President Andres Manuel Lopez Obrador. He also pledged to examine all current contracts for the extraction of this precious metal.

A large majority of legislators in each chamber voted for the proposal. They argued that Mexico should not have untapped lithium reserves and they must be exploited by government companies, rather than private or foreign miners.

However, this law violates Mexico’s commitments under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) according to Mexico’s International Chamber of Commerce.

According to the business group, it acknowledged that Mexico’s Constitution already states that all minerals belong to Mexico.

The statement states that “That recognition should not be confused avec the rights of Mexican investors to participate by way of concessions in economic activities related to exploration and exploitation of mineral resources.”

A dozen companies from around the world have signed contracts for exploration of potential Mexican lithium reserves.

Business groups cited language which prohibits trade partners from imposing new economic restrictions not expressly reserved for them.

CPTPP came into effect in 2018 just weeks after Lopez Obrador had completed his six-year term.

According to the business group, Mexico must compensate mining companies that have active concessions with Mexico. It also warned that Mexico would need to pay compensation for companies that violate their rights.